Category: Nieuws

Many voters think of President Biden as a green energy champion who wants to put fossil fuels out of business. But if you look at the financial performance of oil and natural gas companies under Biden’s presidency, you might think he’s their biggest booster.

Energy has been the best-performing sector during much of Biden’s presidency, which is now fueling a mega-merger consolidation sweep among some of the world’s biggest energy companies.

ExxonMobil announced plans to buy driller Pioneer Natural Resources for $64 billion on Oct. 11, prompting Chevron to bid $53 billion for Hess on Oct. 23. More deals are possible as huge energy firms hustle to lock in premier drilling sites as the point of “peak oil”—maximum global demand for the commodity, followed by a gradual decline — comes into view, perhaps within the next decade.

The Exxon and Chevron deals are both all-stock transactions. That’s possible because shares of America’s two largest energy firms have soared during the past two years, giving the acquirers plenty of headroom for big purchases without having to tap cash or borrow.

Big Oil has been thriving, of course, at the same time Biden is overseeing the biggest green energy push in American history. The 2022 Inflation Reduction Act Biden signed includes green energy incentives that could total more than $1 trillion. Private sector firms are applying for those incentives at three times the rate budgeters expected last year. One consequence is a boom in the construction of factories for electric vehicle components and other green energy gear.

This might sound like a set of schizophrenic developments in the US energy sector, with a jacked-up fossil fuel industry threatening Biden’s green energy push (or vice versa). But it’s not. Big Oil is enjoying a heyday now in part because it’s rebounding from lean times. And while Biden clearly favors renewables over carbon, he has also learned that ample stocks of fossil fuels will be needed for years to keep consumer energy costs down and prevent voters from revolting.

It’s conventional wisdom that oil and gas firms are always rolling in money. But not really. In fact, as the following chart shows, energy sector returns have lagged many other sectors since 2010. During the last 10 years, energy was the worst-performing sector half the time, in terms of stock performance among the 11 major industries represented in the S&P 500 stock index.

Many Americans think gasoline and other energy prices were lower under President Trump than they’ve been under Biden. That’s mostly true — but not because of anything Trump or Biden did. One big reason prices were low from about 2014 through 2020 is that energy firms were overproducing and sacrificing profits as a result. As the shale drilling revolution got underway, many energy firms put profits aside as they invested aggressively in new facilities, in order to gain market share. The assumption was that profits would follow, eventually. As a result, energy investors willing to endure tiny profits or even losses basically subsidized the low cost of gasoline and other forms of energy for consumers.

COVID upended that equation. Oil prices plunged so deeply in 2020 that they briefly turned negative. Energy sector stocks in the S&P 500 lost 37% that year, while the broader index gained 16%, for an underperformance of 53 percentage points. Hundreds of energy firms went bankrupt and the mighty Exxon lost a staggering $22.4 billion.

That washout changed the whole industry. Investors and lenders began to demand short-term returns instead of tolerating losses in exchange for growth. Oil prices climbed off the floor as the global economy recovered from COVID. Then came Russia’s invasion of Ukraine in February 2022, which added a fear premium to oil prices for much of the year.

Yahoo Finance, Rick Newman, November 6, 2023

The city of Cushing in Oklahoma, United States, is a central hub within the United States and worldwide oil industry. It connects major pipelines within the United States and is the location where the oil futures contracts end up being delivered; the crude oil tanks around Cushing have approximately 91 million barrels of storage capacity, which is the world record for the World’s Biggest Tank Farm, according to the WORLD RECORD ACADEMY.

“The city of Cushing in Oklahoma is a central hub within the United States and worldwide oil industry. It connects major pipelines within the United States and is the location where the oil futures contracts end up being delivered.

“Cushing is a “vital transshipment point with many intersecting pipelines, storage facilities and easy access to refiners and suppliers.” Crude oil flows “inbound to Cushing from all directions and outbound through dozens of pipelines.” In 2005, crude oil and refined products in the US were almost always transported by interconnected pipeline systems. In Oklahoma, eight private companies operated almost all the pipelines and frequently operated oil terminals and refineries: Enbridge; Enterprise Products; Explorer Pipeline; Jayhawk; Magellan Midstream Partners; Plains All American Pipeline; Sunoco; and Valero Energy.

“The crude oil tanks around Cushing have approximately 91 million barrels of storage capacity. On October 28, 2016, tanks held a total of 58.5 million barrels of oil, though it has dropped in 2018.”

“Though the refineries from its boom years earlier in the century are gone, the town of Cushing, northeast of Oklahoma City, is a major storage site for crude oil and gas that comes and goes by pipeline. Cushing also became famous as a trading benchmark for the industry, when, in 1983, the New York Mercantile Exchange selected the price that a 42-gallon barrel of West Texas,” The Center For Land Use Interpretation says.

“Intermediate crude is trading for at Cushing, as an amount reflecting the general price of oil in the global marketplace. Cushing developed as a holding point between supply, coming principally from Texas, and demand, the markets of the north and northeast, like Chicago, to which it is connected by transcontinental pipeline.

“Cushing would be the southern terminus for the Keystone Pipeline from Alberta, should it be built. Several companies operate tank farms south of town, including Magellan, Enbridge, and PXP, with a total capacity of more than 30 million barrels in around 300 above-ground tanks.”

“Today Tank World News journeys to Cushing, Oklahoma, a small town of no more than 8000 people nicknamed the “Pipeline Crossroads of the World” which hosts the world’s largest tank farm,” the Tank World says.

“An oil town since 1912 when the first wildcatters struck oil, it quickly developed major infrastructure and once its own stocks dwindled it shifted to storage aided by a large number of pipes already in place and its central position in the heart of America. Recent figures from Bloomberg Business Week state the total crude stocks (including stock in farms and pipeline fill) to be in excess of 80 million barrels, with a working volume of 65 millions barrels and an increase of 14 million barrels from September 2011.

“Cushing Oklahoma, is the home of 13 oil storage companies including Enbridge, Magellan, Enterprise and more. Currently, there are 13 pipelines bringing crude oil into Cushing with an estimated total capacity of 1.7 million bpd. Whilst going the other way, out of Cushing there are 12 pipelines running in all directions with a capacity of 1.5 million bpd.”

“Cushing is strategically located to pull in barrels from top U.S. shale fields and Canada, while its hundreds of tanks are tied to pipelines that supply U.S. mid-continent and southern refineries and funnel oil to Gulf Coast export ports,” the Reuters says.

“Tank storage of below 20 million barrels, or between 10% and 20% of Cushing’s over 98 million barrels of capacity, is considered close to operational low, say traders. Below those levels the oil is difficult to remove. Water and sediments often settle at the base of storage tanks, making the crude oil at the bottom unable to meet quality standards for refiners or exporters.

“Some tanks have outlets at the bottom that can be used to empty oil and sludge completely, while others do not and therefore the oil at the base cannot be removed completely. At lower levels, it becomes more expensive for companies to get the remaining crude out of the tanks. Roofs of storage tanks also float on the oil, preventing vapors from building up or escaping into the atmosphere. When the legs of these roofs touch the base, it creates a gap between the oil and the roof, causing combustible vapors to form.”

“North American crude oil is pouring into Cushing, where dozens of steel storage tanks fan out from the outskirts of town, tank farms that march on for miles and connect to every major oil patch in North America through an maze of pipelines. Cushing’s nickname is “The Pipeline Crossroads of the World,” the CNBC says.

“It’s one of the largest crude oil storage hubs on Earth, and in the U.S. arguably the most important. Delivery for West Texas Intermediate crude is taken here, priced for Nymex contracts and stored before it’s shipped to refineries.

“However long that process takes, in the meantime, just outside the geographical limits of the tiny town of Cushing, some $2.5 billion worth of black gold is sitting in tanks, awaiting delivery and drawing the attention of the entire industry.”

“This vibrant hub has 90 million barrels of storage capacity where commercial companies are active participants in the market. The storage capacity has grown dramatically over the past few years and now accounts for 13% of total U.S. oil storage,” the CME Group says.

“Cushing’s inbound and outbound pipeline capacity is well over 6.5 million barrels daily. It is interconnected to multiple pipelines, each capable of transporting hundreds of thousands of barrels of oil daily.

“Significant investments in infrastructure, along with increased U.S. oil production, and the repeal of the oil export ban have strengthened the role of WTI as the leading global benchmark. As U.S. oil production continues to increase, Cushing will play an even greater role in the global petroleum landscape.”

“Cushing is known as the “Pipeline Crossroads of the World” for crude oil, with approximately 100 million barrels of storage in the tank farms in the area. The city plays a critical role in the energy sector due to its expansive storage operations and as a significant physical market price reference or benchmark,” the Oklahoma Department of Commerce says.

“The Cushing Economic Development Foundation, Inc. and the City of Cushing announced that Southern Rock Energy Partners, LLC (SREP) has selected Cushing as the site for the company’s next-generation, full conversion crude refinery. The project is expected to have $5.56 billion in capital investment and supply more than 420 full-time employees for operations.

“The project will result in SREP developing a 250,000-BPD next-generation, full conversion crude refinery which will reduce and eliminate 95% of greenhouse gas emissions while producing approximately 91.25 million barrels or 3.8325 billion gallons annually of cleaner transportation fuels including gasoline, diesel, and jet fuel from crudes sourced domestically from the Anadarko, Permian, Denver and Julesburg, and Bakken Basins. The project will be constructed over a 36-month period beginning in 2024 with commercial operations beginning in 2027. Total economic impact for the first decade of operations of the facility to the Cushing area and the state of Oklahoma is estimated to be more than $18 billion.”

“The first oil well in the Cushing area was drilled in 1896, but it was not until 1912 that the Cushing field was discovered in earnest. This field was unique in that it produced a high-quality crude oil that was in great demand by refineries across the country. The oil was also relatively easy to transport, as it was located near several major rail lines,” the 1600 KUSH says.

“One of the most important events in the history of the Cushing oil fields occurred in 1929, when the world’s first oil futures contract was traded on the New York Mercantile Exchange. This contract, which was for the delivery of oil from the Cushing storage tanks, set the standard for oil pricing worldwide and made Cushing a key player in the global oil market.

“Today, the Cushing oil fields continue to play an important role in the American oil industry. The town remains a major hub for oil storage and transportation, with millions of barrels of oil passing through the area every day. While the production levels of the Cushing fields have declined in recent years, they remain a crucial source of oil for the United States and the world.”

“Cushing (Meskwaki: Koshineki, Iowa-Oto: Amína P^óp^oye Chína, meaning: “Soft-seat town”) is a city in Payne County, Oklahoma, United States. The population was 7,826 at the time of the 2010 census, a decline of 6.5% since 8,371 in 2000. Cushing was established after the Land Run of 1891 by William “Billy Rae” Little. It was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker.

“A 1912 oil boom led to the city’s development as a refining center, with over 50 refineries operating in Cushing over its history. Today, Cushing is a major trading hub for crude oil and a price settlement point for West Texas Intermediate on the New York Mercantile Exchange and is known as the “Pipeline Crossroads of the World.”

“Cushing is a major crude oil hub within the United States and worldwide oil industry. It is a “vital transshipment point with many intersecting pipelines, storage facilities and easy access to refiners and suppliers.” Crude oil flows “inbound to Cushing from all directions and outbound through dozens of pipelines.” Crude oil tank farms around Cushing have over 90 million barrels of storage capacity.”

World Record Academy, November 6, 2023

IMTT announced today that it has closed on the sale of the company’s bulk liquids storage terminals located in Alamogordo, NM; Bremen, GA; Macon, GA; Montgomery, AL; and Moundville, AL to JET Infrastructure.

These terminals collectively represent approximately one million barrels of storage capacity, leaving IMTT with 41 million barrels of storage capacity at its terminals on the East, West, and Gulf Coasts and in the Great Lakes and Canada.

“The proceeds from this sale will be reinvested into current and future growth projects, allowing us to continue executing our Greener and Cleaner strategy,” said IMTT Chairman and CEO Carlin Conner.

“As of today, over half of IMTT’s revenue in 2023 is expected to be generated from the storage and handling of non-petroleum products, such as renewable diesel feedstocks, renewable diesel, vegetable and tropical oils, and chemicals. At the same time, we remain committed to supporting our legacy petroleum positions in advantaged markets across the US and Canada.”

New Orleans-based IMTT will continue to own and operate its 11 other terminals across North America, all of which can facilitate marine product movements, including eight terminals with deep water dock capabilities.

Businesswire, Kim Nave, November 2, 2023

Italy recently announced its plan to deploy its first hydrogen powered train by the end of 2024. The Coradia Stream H – which will run on hydrogen fuel cells – is equipped with 260 seats and has a range of 600 km or 373 miles.

Hydrogen as a fuel for rail transportation remains in its early stages. However, the potential exists for applications including industrial, passenger, freight, mining, rapid transit and even trams or hydrolley or hydrogen trollies. The technology -which is similar to that used in the automotive and aerospace industries is being developed by China, Germany, Japan, Taiwan, the UK and the United States.

Alstrom presented the Coradia iLint™ for the first time at Innotrans 2016 in Berlin. Entered into commercial service in Germany in 2018, it became the world’s first hydrogen passenger train. Using a combination of hydrogen fuel with battery energy storage, the zero-emission train releases only steam and condensed water.

The UK’s first hydrogen-powered train – the HydroFLEX – was launched in 2019 and is fitted with hydrogen fuel tanks, a fuel cell, and two lithium-ion battery packs for energy storage. Development plans are on-going to improve the train’s power and performance.

The use of hydrogen shows promise but comes with numerous technical challenges. Hydrogen is almost three times as dense as gasoline on a mass basis but is far less dense on a volume basis. That means it has to be compressed to produce the same energy per volume.

Germany plans to put a total of 14 hydrogen trains in service. However, given there are more than 4,000 diesel-powered trains running in Germany alone, this nascent hydrogen effort is truly just a baby step. But baby steps eventually turn into adult strides, and that’s where the stop that I believe hydrogen transportation will soon achieve.

Energy Central, Tony Paradiso, November 1, 2023

Oil prices eased on Tuesday after rallying more than 4% in the previous session, with traders cautious as they keeps tabs on potential supply disruptions amid military clashes between Israel and the Palestinian Islamist group Hamas.

Brent crude fell 30 cents, or 0.3%, to $87.85 a barrel by 0330 GMT, while U.S. West Texas Intermediate crude eased 31 cents, or 0.4%, to $86.07 a barrel.

Both benchmarks surged more than $3.50 on Monday as the clashes raised fears that the conflict could spread beyond Gaza into the oil-rich region. Hamas launched the largest military assault on Israel in decades on Saturday, while fighting continued into the night on Monday as Israel retaliated with a wave of air strikes on Gaza.

“There is still plenty of uncertainty across markets following the attacks in Israel over the weekend,” said ING analysts on Tuesday, adding that oil markets are now pricing in a risk premium.

“If reports of Iran’s involvement turn out to be true, this would provide another boost to prices, as we would expect to see the U.S. enforcing oil sanctions against Iran more strictly. That would further tighten an already tight market,” the ING analysts added.

While Israel produces very little crude oil, markets worried that if the conflict escalates it could hurt Middle East supply and worsen an expected deficit for the rest of the year.

Israel’s port of Ashkelon and its oil terminal have been shut in the wake of the conflict, sources said on Monday.

Iran is complicit even though the United States has no intelligence or evidence that points to Iran’s direct participation in the attacks, a White House spokesperson said on Monday.

“If the U.S. finds evidence directly implicating Iran, then the immediate reduction in Iran’s oil exports becomes a reality,” said Vivek Dhar, an energy analyst at CBA.

“We continue to believe that Brent oil will ultimately stabilise between $90-$100/bbl in Q4 2023,” said Dhar, adding that the Palestine-Israel conflict raises the risk of Brent futures tracking at $100/bbl and above.

In a more positive sign for supply, Venezuela and the U.S. have progressed in talks that could provide sanctions relief to Caracas by allowing at least one additional foreign oil firm to take Venezuelan crude oil under some conditions.

Reuters, October 10, 2023

In the 1950s the oil market was in the gift of the “Seven Sisters”. These giant Western firms controlled 85% of global crude reserves, as well as the entire production process, from the well to the pump. They fixed prices and divvied up markets between themselves. Trading oil outside of the clan was virtually impossible.

By the 1970s that dominance was cracked wide open. Arab oil embargoes, nationalisation of oil production in the Persian Gulf and the arrival of buccaneering trading houses such as Glencore, Vitol and Trafigura saw the Sisters lose their sway. By 1979, the independent traders were responsible for trading two-fifths of the world’s oil.

The world is in turmoil again—and not only because the conflict between Israel and Hamas is at risk of escalating dangerously. Russia’s war in Ukraine, geopolitical tensions between the West and China, and fitful global efforts to arrest climate change are all injecting volatility into oil markets (see chart 1). Gross profits of commodity traders, which thrive in uncertain times, increased 60% in 2022, to $115bn, according to Oliver Wyman, a consultancy. Yet this time it is not the upstarts that have been muscling in. It is the descendants of the Seven Sisters and their fellow oil giants, which see trading as an ever-bigger part of their future.

The companies do not like to talk about this part of their business. Their traders’ profits are hidden away in other parts of the organisation. Chief executives bat away prying questions. Opening the books, they say, risks giving away too much information to competitors. But conversations with analysts and industry insiders paint a picture of large and sophisticated operations—and ones that are growing, both in size and in sophistication.

In February ExxonMobil, America’s mightiest supermajor, which abandoned large-scale trading two decades ago, announced it was giving it another go. The Gulf countries’ state-run oil giants are game, too: Saudi Aramco, Abu Dhabi National Oil Company and QatarEnergy are expanding their trading desks in a bid to keep up with the supermajors. But it is Europe’s oil giants whose trading ambitions are the most vaulting.

BP, Shell and TotalEnergies have been silently expanding their trading desks since the early 2000s, says Jorge Léon of Rystad Energy, a consultancy. In the first half of 2023 trading generated a combined $20bn of gross profit for the three companies, estimates Bernstein, a research firm. That was two-thirds more than in the same period in 2019 (see chart 2), and one-fifth of their total gross earnings, up from one-seventh four years ago. Oliver Wyman estimates that the headcount of traders at the world’s largest private-sector oil firms swelled by 46% between 2016 and 2022. Most of that is attributable to Europe’s big three. Each of these traders also generates one and a half times more profit than seven years ago.

Today BP employs 3,000 traders worldwide. Shell’s traders are also thought to number thousands and TotalEnergies’ perhaps 800. That is almost certainly more than the (equally coy) independent traders such as Trafigura and Vitol, whose head counts are, respectively, estimated at around 1,200 and 450 (judging by the disclosed number of employees who are shareholders in the firms). It is probably no coincidence that BP’s head of trading, Carol Howle, is a frontrunner for the British company’s top job, recently vacated by Bernard Looney.

The supermajors’ trading desks are likely to stay busy for a while, because the world’s energy markets look unlikely to calm down. As Saad Rahim of Trafigura puts it, “We are moving away from a world of commodity cycles to a world of commodity spikes.” And such a world is the trader’s dream.

One reason for the heightened volatility is intensifying geopolitical strife. The conflict between Israel and the Palestinians is just the latest example. Another is the war in Ukraine. When last year Russia stopped pumping its gas west after the EU imposed sanctions on it in the wake of its aggression, demand for liquefied natural gas (LNG) rocketed. The European supermajors’ trading arms were among those rushing to fill the gap, making a fortune in the process. They raked in a combined $15bn from trading LNG last year, accounting for around two-fifths of their trading profits, according to Bernstein.

This could be just the beginning. A recent report from McKinsey, a consultancy, models a scenario in which regional trade blocs for hydrocarbons emerge. Russian fuel would flow east to China, India and Turkey rather than west to Europe. At the same time, China is trying to prise the Gulf’s powerful producers away from America and its allies. All that is creating vast arbitrage opportunities for traders.

Another reason to expect persistent volatility is climate change. A combination of increasing temperatures, rising sea levels and extreme weather will disrupt supply of fossil fuels with greater regularity. In 2021 a cold snap in Texas knocked out close to 40% of oil production in America for about two weeks. Around 30% of oil and gas reserves around the world are at a “high risk” of similar climate disruption, according to Verisk Maplecroft, a risk consultancy.

Then there is the energy transition, which is meant to avert even worse climate extremes. In the long run, a greener energy system will in all likelihood be less volatile than today’s fossil-fuel-based one. It will be more distributed and thus less concentrated in the hands of a few producers in unstable parts of the world. But the path from now to a climate-friendlier future is riven with uncertainty.

Some governments and activist shareholders are pressing oil companies, especially in Europe, to reduce their fossil-fuel wagers. Rystad Energy reckons that partly as a result, global investment in oil and gas production will reach $540bn this year, down by 35% from its peak in 2014. Demand for oil, meanwhile, continues to rise. “That creates stress in the system,” says Roland Rechtsteiner of McKinsey.

Future traders
This presents opportunities for traders, and not just in oil. Mr Rechtsteiner notes that heavy investment in renewables without a simultaneous increase in transmission capacity also causes bottlenecks. In Britain, Italy and Spain more than 150-gigawatts’-worth of wind and solar power, equivalent to 83% of the three countries’ total existing renewables capacity, cannot come online because their grids cannot handle it, says BloombergNEF, a research firm. Traders cannot build grids, but they can help ease gridlock by helping channel resources to their most profitable use.

Europe’s three oil supermajors are already dealing in electric power and carbon credits, as well as a lot more gas, which as the least grubby of fossil fuels is considered essential to the energy transition. Last year they had twice as many traders transacting such things than they did in 2016. Ernst Frankl of Oliver Wyman estimates that gross profits they generated rose from $6bn to $30bn over that period. Other green commodities may come next. David Knipe, a former head of trading at BP now at Bain, a consultancy, expects some of the majors to start trading lithium, a metal used in battery-making. If the hydrogen economy takes off, as many oil giants hope, that will offer another thing not just to produce, but also to buy and sell.

AoL, October 23, 2023

Saudi Aramco is entering the global LNG business by signing a deal to buy a minority stake in LNG company MidOcean Energy, which is in the process of acquiring interests in four Australian LNG projects, the Saudi state oil giant said on Thursday.

Aramco has signed the definitive agreements to buy a strategic minority stake in MidOcean Energy for $500 million, which is the Saudi firm’s first international investment in LNG.

MidOcean Energy is formed and managed by EIG, an institutional investor in the global energy and infrastructure sectors, with which Aramco signed in 2021 a deal to sell a 49% stake in Aramco Oil Pipelines Company.

The LNG stake agreement announced today includes an option for Aramco to raise its shareholding and associated rights in MidOcean Energy in the future. The deal is subject to closing conditions which include regulatory approvals, Aramco said.

The Saudi giant, the world’s single largest crude oil exporter, has been looking for months to tap the global gas and LNG business and was rumored earlier this year to have been in early talks with developers aiming to secure a stake in a project in the United States or Asia.

Going into LNG trading would be another lucrative business for the Saudi oil giant, considering that LNG demand is only set to grow in the coming years as Europe ditches Russian gas and Asia looks to use more natural gas instead of coal.

Commenting on today’s deal, Aramco Upstream President, Nasir K. Al-Naimi, said: “This is an important step in Aramco’s strategy to become a leading global LNG player.”

“MidOcean Energy is well-equipped to capitalize on rising LNG demand, and this strategic partnership reflects our willingness to work with leading international players to identify and unlock new opportunities at a global level,” Al-Naimi added.

MidOcean Energy’s initial focus is on the LNG deals in Australia, but the company believes the opportunity set is global, said Blair Thomas, EIG chairman and CEO.

OilPrice.com, Tsvetana Paraskova, September 28, 2023